The professional indemnity insurance company (Insurer) has the rights without obligation to take over the defence of any claims against the insured in the latter’s place and conduct same. The insurer also has the right to have full discretion while conducting and settling any proceedings.

After taking over the defence, the insurer has the right to relinquish any claim of the same. The costs expended by the insurer for the defence of the claim or any payment or settlement made by the insurer will be deducted from the limits of indemnity of the policy.

If the insurer decides to exercise its right under its sole discretion, to take over the defence of the insured, the insurer’s liability or obligations shall remain the same under this professional indemnity policy had it not taken the option to exercise this right. No action taken by the insurers in defending the claims shall be modified or expanded in any manner.

The insurer has the right to make payment to the insured relating to any claim to a series of a claim falling under this policy. After which the insurer can relinquish its conduct and control of the defence of the claim and should not be held liable for anything in connection with such claims.

The insurer has the right to cancel this policy by giving 30 days’ written notice to the policyholder sent to the insured’s last known registered address. In any such event, the Insurer should return the premium in pro-rate. If there is any retention clause, then the insurer should apply the same before the settlement of the pro-rated premium.

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Moreover, it is the prime responsibility of the insured to cooperate with the insurance company in the process of the claim settlement and stay away from taking any decision without informing the insurer.

Case: 1

A builder was given the task of drafting and submitting plans for a large concrete slab which was yet to be the foundation of a large storage building. The first draft, which he submitted needed some amendments and therefore, the second draft was also submitted, which was approved by the client.

After that, the concrete slab was laid down as per the plan submitted by the policyholder, and the storage facility was also made.

However, after a few weeks, cracks started appearing in the concrete slab, and a claim was lodged against the builder. The report of the investigation found that the builder had submitted the first draft instead of the second draft which was actually approved.

To save itself from the long court battle, the builder opted for the out-of-the court settlement with the client and agreed to pay Rs 10 lakh. When the builder paid the compensation, he approached his professional indemnity insurance company.

However, as the builder had entered into the settlement agreement without the consent of the insurance company, the insurer refused to settle his claim. As the builder did not take the permission of the insurance company before settling the claim, the insurer rejected the claim.

Case: 2

Last week, a case was filed against Dr. Rajiv Saxena when the family of one of his patients, Ajay, charged him under negligence case.

Ajay was hospitalised when he started complaining of chest pain. The on-duty doctor Rajiv started the treatment immediately, however, seeing the deteriorating condition of Ajay, the doctor gave him some medicines. However, immediately after the medicine, Ajay fell unconscious and later died. It was found that Ajay was allergic to certain medicines and without checking it, the doctor gave him medicines which made his condition worse.

Being a breadwinner of the family, the sudden demise of Ajay shattered his family’s. At the same time, his brother filed a case against Rajiv. Luckily, Rajiv had a professional indemnity insurance, and he approached the insurer for the claim settlement.

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However, at the time of notifying the claim, Rajiv did not give complete details of the accident along with the information related to the patient’s health condition. The insurer followed Rajiv and called him numerous times to get the complete information. However, Rajiv did not cooperate with the insurer, and as a result, the claim got delayed by more than two months.

At last, the insurer rejected the claim due to non-cooperation of Rajiv. Without material facts about the case, how can Rajiv expect his insurer to settle the claim?